Swedish Economists in the 1930s Debate on Economic Planning

Author: Prof. Benny Carlson

Publisher: Springer International Publishing

Book Series : Palgrave Studies in Economic History

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

About this book

The 1930s, characterised by repercussions from World War I and the Great Depression, was an era of populism, nationalism, protectionism, government intervention and attempts to create planned economies. The perceived need for economic planning emerged in Sweden in part due to the increasing political strength of the Social Democrats and their evolution from a party hampered by Marxist fatalism to a pragmatic mass movement. The Swedish debate continued beyond World War II and is still relevant to today’s economic crises, which have resulted in a demand for action coming from below (populism) and above (elitism).

Carlson surveys the arguments for and against economic planning as they were put forward by leading Swedish economists in the 1930s, with a focus on the thoughts of Gustav Cassel, Eli Heckscher, Gösta Bagge, Gunnar Myrdal and Bertil Ohlin, among others. In so doing he provides a timely exploration of the debate on the necessary and desirable extent of state intervention in market economies.

Frontmatter

Chapter 1. Introduction

Abstract

In times of crisis, demand for government action in general and economic planning in particular is sure to surge. The interwar era is a classic example. After the outbreak of the Great Depression in 1929, demand for planning—in contrast to capitalist market “anarchy”—was voiced in many quarters. And not only voiced. The 1930s was an era of populism, nationalism, protectionism, government intervention and attempts to create planned economies. With the Great Recession of 2008, structural change due to globalization, waves of migration and impending climate change, a new era of populism, nationalism, protectionism and demand for planning has begun. The ambition of this book is to survey the arguments for and against economic planning as they were put forward by leading Swedish economists in the 1930s and to put these arguments into a context of events and inspirational sources. Developments in Sweden were, according to political scientist Leif Lewin’s classic exposition of the debate on economic planning in Sweden, “something extraordinary also from an international perspective”.

Benny Carlson

Chapter 2. The International Context

Abstract

The ambition in this chapter is to summarize debates and events in the 1920s and 1930s related to economic planning in Great Britain and the United States. The British case was complex; planning was “a word that was on everyone’s lips and yet fractured by a multitude of interpretations and meanings”. Planning ambitions in the US made an imprint around the world when Franklin Roosevelt in the spring of 1933 launched his New Deal. In both countries, the ideas of detailed planning was more or less eclipsed by John Maynard Keynes’ “middle way” at the end of the 1930s. Furthermore, the so-called socialist calculation debate, which had been unfolding in German language on the European Continent in the 1920s, triggered by Ludwig von Mises, expanded into English language contributions in the 1930s. Friedrich von Hayek was probably the most outspoken economist against economic planning. He was challenged by E. F. M. Durbin, one of his colleagues at the London School of Economics.

Benny Carlson

Chapter 3. The Swedish Economists

Abstract

Five Swedish economists were at the heart of the Swedish debate on economic planning: Gustav Cassel, Eli Heckscher and Gösta Bagge represented an older generation of classical/market liberals opposed to planning, Bertil Ohlin and Gunnar Myrdal a younger generation of social liberals or socialists advocating planning. These five fought over economic planning from the late 1920s to the late 1930s. Cassel, Heckscher and Ohlin wrote in daily newspaper on a regular basis, Bagge and Myrdal were more directly involved in policy-making. A few other economists occasionally intervened in the debate: David Davidson, Sven Brisman, Karin Kock, Gustaf and Johan Åkerman. Ernst Wigforss, leading Social Democrat and the man who “divorced” planning from socialization, will also play a role in our story. He was not an economist by profession but anyway at the forefront of economic policy debates.

Benny Carlson

Chapter 4. Economists in the Swedish Debate

Abstract

During the 1920s, the Swedish debate on the role of the state in the economy was lively. The fight over planning began in earnest in 1930, when the Conservative government introduced a “milling obligation” which Eli Heckscher branded as “economic planning with no plan”, after the pattern of Soviet Russia. The New Deal caught the attention in mid-1933 and was particularly scrutinized by Bertil Ohlin. In early 1934, when the Social Democrats revealed their intention to increase the influence of the state over economic life in spite of the economic recovery, the planning debate went into high gear. When Gunnar Myrdal succeeded Gustav Cassel as professor of economics at Stockholm University, he emphasized the necessity of central economic planning. Cassel, in a lecture in London, warned that cumulative government interventions would end in dictatorship. Heckscher, in the Economic Society, attacked his younger colleagues as “apostles of the planned economy”. Myrdal and Ohlin countered that interventions were needed to avoid major dangers. The next major battle, with Heckscher and Ohlin as antagonists, took place when economists from the Nordic countries in 1935 convened in Oslo. In 1936, Ohlin summarized his ideas on “framework planning” in a book on “Free or Directed Economy”. When John Maynard Keynes’ General Theory appeared, Cassel and Heckscher claimed it was all but general, whereas Ohlin attempted to establish that the younger generation of Stockholm economists had attacked the same problems as Keynes independently of him.

Benny Carlson

Chapter 5. Summary and Conclusions

Abstract

In this final chapter, the debate on economic planning is summarized, the advocates’ and opponents’ main arguments are reviewed and a number of questions are addressed: Which were the main foreign sources of inspiration? Swedish economists seldom referred to any sources of inspiration. Bertil Ohlin was the exception and his sources were mainly British. How did the economists affect Swedish economic policy? Gustav Cassel, Eli Heckscher and Ohlin exerted influence through their intense hammering out of arguments in leading newspapers while Gunnar Myrdal and Gösta Bagge were more involved in policy-making; Ohlin’s “middle way” seems to have been particularly influential in the long run. How do the arguments of the Swedish economists compare to arguments of international heavyweights like Friedrich von Hayek and E. F. M. Durbin? The Swedish economists seem to have been at least as eminent in producing arguments for and against economic planning as their foreign colleagues. What can we today learn from the debate? Populist and nationalist regimes have a tendency to resort to violent government interventions to try to enhance their political and economic power and then the question arises, just as in the 1930s, how liberal market economies should respond. In this context, yesterday’s arguments for and against economic planning have a more or less timeless actuality.

Benny Carlson

Backmatter

Title: Swedish Economists in the 1930s Debate on Economic Planning
Author: Prof. Benny Carlson
Publisher: Springer International Publishing
Electronic ISBN: 978-3-030-03700-0
Print ISBN: 978-3-030-03699-7
DOI: https://doi.org/10.1007/978-3-030-03700-0

Springer Professional

About this book

Table of Contents

Frontmatter

Chapter 1. Introduction

Chapter 2. The International Context

Chapter 3. The Swedish Economists

Chapter 4. Economists in the Swedish Debate

Chapter 5. Summary and Conclusions

Backmatter